America hangs on to alternate finance solutions

Last year, about half of fintech investment was in lending companies, according to an article in American Banker The reasons are becoming abundantly clear. As pointed out by another recent article in the Atlantic almost half of Americans would find trouble finding $400 to pay for an emergency. This leads to a large opportunity for lending, much of it unsatisfied by the traditional banks as they are rarely set up to satisfy that end of the market.

As a result it’s generally been very expensive to be poor due to the high-cost alternatives to traditional finance. You also don’t have to be poor to be subject to having to use alternative finance mechanisms. As Arjan Schutte, founder and managing partner at Core Innovation Capital, said in the American Banker article.

“I live in L.A., and I find it sad how many BMWs are parked outside of McMansions of people who cannot make ends meet. So this isn’t just about the bottom 1%. It’s about the bottom 90%, with a special focus on low and moderate income”.

He also recognises the huge opportunity to get focussed on this area and provide compliance and risk management servcies that are specifically designed for the market

“In the murky, skunky world of payday lending, there are 30% default rates at worst,” he said. “That still means that a handy majority of people are paying back on time and as promised, so 70% are mispriced. To me, the opportunity isn’t about making loans to people who aren’t going to repay them, it’s about assessing people’s risk dramatically better.”

Three of five Americans believe that their banks are failing to keep up with their needs in today’s connected world, leading many to wonder if traditional financial institutions will disappear and what kinds of financial technology (FinTech) companies will emerge to take their place. As it turns out, the majority (57%) believe that traditional financial institutions as we know them will cease to exist within their lifetime while nearly 70% believe that it’s FinTech solutions that are making their lives and financial health better.

Fintech Bank is on a mission to help money service businesses look after their customers, manage their risk and do so at a price point that doesn’t drive the customers off the edge